Big words, small deeds Russia and China in the Arctic

INTRODUCTION

Russia's war against Ukraine has prompted a large number of states to reassess their security outlook. This has also affected a region that, after the Cold War, was long regarded as a zone of exceptional peace and cooperation: the Arctic^(x). In the High North, confrontation has become the order of the day, while diplomacy and dialogue are receding into the background. Relations between the two largest Arctic military powers, the United States and Russia, have deteriorated^(x). Meanwhile, strategic competition between the United States and China is accelerating to cover ever-wider stretches of the globe, including the Arctic. China is not a littoral state of the Arctic Ocean, but has articulated its own interests in the region. In addition to the massive transformation to the Arctic natural environment caused by climate change, the region is also gradually being militarised by major powers. Against this backdrop, the activities of the great powers in the Arctic deserve special attention. Of particular interest are the regional cooperation efforts of Russia, the largest Arctic state, and China, a close partner of Russia and observer at the Arctic Council. In February 2022, Beijing and Moscow labelled their relationship a "comprehensive strategic partnership" and promised to further expand their cooperation in the Arctic^(x). At first glance, Russia and China's interests in the region are indeed complementary. China's demand for raw materials is rising, while Russia continues to base its economic model on the export of natural gas and oil. Due to the depletion of resource deposits underneath established production sites, Russian oil and gas companies are moving their exploration projects further north. A quarter of fossil fuels exported by Russia is extracted north of the Arctic Circle^(x). And more than ten percent of Russia's gross domestic product is generated in Arctic territories. Should Russia's 2020 "Strategy for the Development of the Arctic by 2035" be implemented in full, the importance of the Arctic regions for the Russian economy will only continue to grow^(x). A key feature of Russia's Arctic strategy is the extraction of oil and natural gas, and their transport by sea. As early as 2019, Russia's leadership set itself the goal of significantly increasing the proportion of Russian natural gas exported by tanker, instead of by pipeline^(x). Many of the projects to tap into new gas deposits on the Yamal Peninsula in Siberia, as well as the Gydan Peninsula on the opposite bank of the Ob River, include plans for the construction of plants for the liquefaction of natural gas, as well as new seaports and terminals.

China, in turn, already now considers Russia to be an important partner for meeting its growing demand for fossil fuels^(x). Beijing also aims to diversify its range of energy suppliers. Oil and gas imports from the Middle East are to be reduced, as China fears that, in the event of a military conflict, the United States could intercept energy shipments at maritime bottlenecks such as the Malacca Strait^(x). China also hopes to reduce its coal consumption, to lower air pollution and carbon dioxide emissions. Among other measures, it is planned that coal is to be replaced by liquefied natural gas, which will be imported by sea^(x). That is why Chinese energy companies are considering further investments in the gas-rich Russian far north. In addition, China has repeatedly expressed an interest in expanding maritime traffic in the Arctic Ocean^(x). To support Chinese shipping companies in their northerly expeditions, Beijing has pledged investments to expand Russian Arctic ports such as the White Sea port of Arkhangel'sk. However, none of these investment plans has so far been successfully implemented^(x). China advocates a restrictive interpretation of the Arctic littoral states' claims to the Arctic continental shelves, and champions freedom of navigation in Arctic waters, partly in order to give Chinese fishing fleets access to as much of the central Arctic Ocean as possible^(x).

Alongside the general strengthening of China-Russia ties after 2014, the interest of both countries to cooperate in energy and shipping have served as key drivers of contacts in the Arctic. This is reflected in the inclusion of numerous joint activities in the Arctic (see table in the annex for investments and financing agreements of Chinese companies in the Russian Arctic) in the "strategic partnership without borders" declaration issued by Xi Jinping and Vladimir Putin on 4 February 2022, on the sidelines of the Beijing Winter Olympics^(x). Moscow's welcoming attitude towards China's Arctic ambitions represents a notable departure from previous Russian diplomacy in the region. Russia traditionally tried to prevent non-Arctic states from amassing political weight in the Arctic. Indeed, when China applied to join the Arctic Council as a permanent observer in 2007, Russia initially lobbied against the application. Just one week before the 2013 Arctic Council summit in Kiruna, Sweden, Foreign Minister Sergei Lavrov "categorically" ruled out granting China observer status^(x). The change of course that followed was likely due to pressures from the Russian energy sector. A key role was played by Igor Sechin, who as Deputy Minister President had initiated the "Strategic Russia-China Dialogue for the Fuel and Energy Sector" in 2009 and, following his appointment as CEO of Rosneft' in 2012, exerted pressure on Putin to approve controversial advance payment deals between Rosneft' and Chinese banks. In the run-up to the 2013 Arctic Council summit, Russian energy corporations pushed ahead on their own initiative to expand Arctic cooperation with China, perhaps to pre-empt their growing dependency on shrinking markets in Europe^(x). At Kiruna, the foreign ministers of the member states then managed to strike a diplomatic deal at the suggestion of the US: Canada gave up its resistance to granting the EU observer status and Russia agreed to grant that same status to China^(x).

Since then, Sino-Russian energy cooperation in the Arctic has made much progress. In January 2014, the China National Petroleum Company acquired a twenty percent stake in Novatek's "Yamal LNG" project. This corresponds to a share held by the French oil company Total Energies since 2011. The Silk Road Fund has been the fourth largest partner in the consortium, with a 9.9% stake held since 2015. "Yamal LNG" developed the Yuzhnoe-Tambeyskoe natural gas field on the Yamal Peninsula and has been producing natural gas and gas condensate there since 2017. In May 2014, Gazprom and the China National Petroleum Company signed a contract to the value of USD 400 billion for the supply of gas through the Sila Sibiri (Power of Siberia) pipeline. The swift conclusion of the contract following difficult negotiations was viewed by observers as a corollary of China's de facto backing of Russia in the aftermath of Russia's annexation of Crimea. Shortly afterwards, the China Import-Export Bank granted Novatek an emergency loan to mitigate the impact of Western financial sanctions on "Yamal LNG". As a result of these investments, China became the most significant foreign economic player in the Russian Arctic. This deepened the material basis of Sino-Russian bilateral relations. With its presence above the Arctic Circle expanded, China reconceptualised its polar interests in the context of China's desired role of a "responsible great power" as envisioned by Xi Jinping. In 2018, Beijing released its first 'Arctic policy white paper'^(x). In it, China defines itself as a "near-Arctic state", emphasising its interest in researching climate change in the Arctic and its impact on mainland China, in promoting "connectivity and sustainable development", as well as underlining China's "rightful and rational" participation in Arctic international relations.

China's emphatic claim to the pursuit of its own interests in the Arctic provoked an immediate counterreaction from western Arctic states. The United States, which under President Donald Trump had readjusted its focus onto competition with China, gradually began to frame the Chinese presence in the far north in terms of military security^(x). From 2019, the Trump administration also accused Russia, which had recently completed a modernisation of its Arctic armed forces, of aiming to "destabilise" the Arctic security system in lockstep with the Chinese^(x).

This created a dilemma for Moscow. On the one hand, due to Western sanctions, the continued implementation of Russia's Arctic development plans largely depended on the goodwill of Chinese investors. Russia was prepared to tolerate Chinese advances in the Arctic in return for better economic relations. On the other hand, Russia also pursued the strategic goal of shielding the Arctic from international conflicts, preserving its status as a regional military and economic power, and counteracting any weakening of its position in the Arctic through Western or Chinese activities. The assertive tone of the Chinese 'white paper', coupled with difficulties in the realisation of promised Chinese investments^(x), led to a certain sense of disillusionment on both sides^(x).

Before Russia's full-scale invasion of Ukraine, it would therefore have been unfounded to speak of an Arctic alliance between Russia and China^(x). Rather, the two countries had entered into limited regional cooperation. The forces of attraction emanating from their inherently compatible interests were weakened by the fact that Russia was not prepared to put its traditional 'Arctic great power status' up for grabs. China, in turn, also came to recognise the limits of its Arctic ambitions. From 2018, Beijing made efforts to invest in Arctic countries and territories, such as Finland, Greenland, and Norway^(x). At the same time, Beijing became more involved in the Arctic Council working groups and regional research projects^(x), while striking an overall more conciliatory note in its Arctic diplomacy.

RUSSIA AND CHINA IN THE PARALYSED ARCTIC GOVERNANCE SYSTEM

As a consequence of Russia's full-scale invasion of Ukraine in February 2022, the governance system of the Arctic sank into disarray, and thereby altered the basis of Russia and China's regional partnership. On March 3, 2022, the Arctic states of Denmark, Finland, Iceland, Canada, Norway, Sweden and the US all declared that they would suspend their participation in Arctic Council meetings with immediate effect, in protest at Russia's war^(x). The activities of the Council and its working groups thus ground to a halt, halfway through the period of Russia's Arctic Council presidency, which lasted from May 2021 to May 2023. It is problematic, however, that the governance system of the Arctic is a highly decentralised network of treaties and bilateral and multilateral agreements, which regulate divergent aspects of environmental protection, maritime and shipping law, political and social rights, sovereignty issues, and climate policy obligations^(x). Many of these treaties, such as the United Nations Convention on the Law of the Sea^(x), have a supra-regional scope. The multi-layered structure of the Arctic governance regime made it difficult, if not impossible, for the western Arctic states to centralise the decision to terminate or dissolve their contractual relations with Moscow. While some treaties and cooperation formats were swiftly suspended, others remained in force due to practical necessity or the exceptional requirements of individual western Arctic states. In general, all those elements of the Arctic governance system enshrined in international treaties, whose termination or suspension would be subject to the Vienna Convention on the Law of Treaties^(x), have proven more durable than non-binding cooperation agreements^(x).

For example, Russia is still a member of the United Nations Framework Convention on Climate Change^(x), which, while not a legal document specifically for the Arctic, is of considerable importance for the region. Russia also remains a party to the legislation and procedures of the International Maritime Organisation, known as the Polar Code, which came into force in 2017. Norway continues to fulfil its obligations under the Spitsbergen Treaty^(x), which regulates the international community's access rights to a Norwegian-administered archipelago on which Russia maintains several settlements despite occasional spats over the access of Russian supply vessels to the port of Barentsburg^(x).

Bilateral border agreements between Finland and Russia and Norway and Russia also remain in force, although coastguard cooperation between the countries was suspended. Norway in 2022 and 2023 decided to sign new annual fisheries agreements with Russia^(x), even though Moscow in October 2023 threatened to suspend the agreement in response to Norway's decision to close all but three of its ports to Russian fishing vessels^(x). Treaties on scientific cooperation, such as the Agreement on the Conservation of Polar Bears^(x), also continue^(x). It is particularly noteworthy that the 2021 Agreement to Prevent Unregulated High Seas Fishing in the Central Arctic Ocean^(x), which imposes strict restrictions on the fishing fleets of Russia, Iceland, China, Japan, South Korea and the EU states, also remained in force. Representatives from Russia took part in a meeting of national delegations in Seoul in November 2022^(x).

On the other hand, EU states stopped all scientific cooperation with Russia in March 2022. Several large Arctic research projects were terminated. The Northern Dimension, an EU cooperation platform with Russia, Iceland and Norway, ended its activities. The Barents Euro-Arctic Council and the Council of the Baltic Sea States suspended Russia's participation. Russia then announced its withdrawal from both formats on March 11^(x). The International Council for the Exploration of the Sea, an advisory body for the fishing industry, also excluded Russia by majority vote of its member states.

In June 2022, the Western Arctic states decided to resume those activities of the Arctic Council in which Russia did not necessarily have to participate in line with the final programme of the Council's 2021 Reykjavik Conference. The Council thus decided against its dissolution, which in any case would have only been possible with the consensus of all eight member states. Moscow had previously expressed its displeasure at the suspension of the Council's activities and maintained the events it had planned under the Russian Presidency^(x).

In spring 2023, Norway took over the Council Presidency from Russia. The Norwegian Foreign Minister confirmed her intention to resume the Council's work on "climate change, sustainable development and efforts to improve the well-being of people in the region"^(x). In autumn 2023, the eight Arctic states announced an agreement on new guidelines to allow the working groups and expert group of the Arctic Council to resume their work^(x). This indicates that the Arctic states are aspiring to relaunch institutional cooperation in the region under Norwegian leadership. It remains to be seen whether Norway will succeed in the endeavour. Although the three binding agreements concluded under the auspices of the Arctic Council - the Search and Rescue Agreement (SRA), the Oil Spill Preparedness and Response Agreement (OSPA) and the International Scientific Cooperation Agreement (ISCA) - remain formally in force, the decision in March 2022 to stop cooperating with Russia is currently preventing their practical implementation. In addition, given the current political climate, the consensus principle of the Arctic Council is paralysing the Council's decision-making ability. The blockage of the Council also prevents observer states like China from participating in Arctic diplomacy.

In April 2022, President Putin announced that Russia would henceforth give priority in its Arctic cooperation efforts to "friendly" non-Arctic states, such as Brazil, India and China. Russia, which held the Council presidency until May 2023, consequently invited numerous states from Africa, Asia and Latin America to Arctic-related events held on Russian soil. In April 2023, Russia announced its plan to establish a new research station on Svalbard in cooperation with the BRICS countries (Brazil, Russia, India, China and South Africa). To date, Russian representatives have not, however, publicly floated the idea of replacing the Arctic Council with any alternative, more "multipolar" cooperation format. Russia on multiple occasions signalled its willingness to relaunch the work of the Arctic Council. At the press conference on the handover of the Council presidency from Russia to Norway in May 2023, Ambassador Nikolai Korchunov stated that Russia stood "ready to cooperate with other Arctic states". Moscow announced that it has no "intention of developing alternative forums to the Arctic Council"^(x). At the same time, Russia has branded the other Arctic countries as "unfriendly states" and removed any mention of the Arctic Council from its strategy document on the "Development of the Arctic until 2035"^(x). With relations between Russia and the West at an all-time low, a full resumption of Arctic cooperation seems unlikely as long as the war in Ukraine continues.

China is reacting cautiously to all these developments. On the one hand, dissolving the Arctic Council as an exclusive regional forum could be seen as being in Beijing's interests. On the other hand, China's observer status in the Arctic Council contributes to justifying its presence in the region as Beijing uses this status to emphasise that the entire Arctic - and not just the central Arctic Ocean - is the "common heritage of mankind". From this, the Chinese leadership derives its demand for easier access to the region and its resources^(x). However, it makes no secret of its aim to return the Arctic Council to its status quo ante. While offering support to the Norwegian ambition to preserve Arctic Council cooperation^(x), Beijing is also insisting that cooperation with Russia be resumed^(x). This goal was reiterated by the Chinese Arctic ambassador Gao Feng and his Russian counterpart Nikolai Korchunov during the latest round of Sino-Russian consultations on Arctic matters in September 2023^(x).

OF SANCTIONS AND SUBSTITUTIONS: SINO-RUSSIAN ARCTIC ECONOMIC TIES

Western sanctions imposed against Russia are intended to damage Russia's economy, reduce its economic and technical capabilities for waging war, and persuade Moscow to stop its invasion of Ukraine. As taxes on profits from the energy and raw materials sector have made up a significant proportion of the Russian state budget revenue for many years - around 40 percent in 2022 - energy companies have also been subjected to sanctions^(x). 90 percent of the natural gas and a fifth of the oil produced in Russia are already being extracted in regions north of the Arctic Circle^(x). And Russia intends to further increase oil and gas production in the Arctic. The energy giants Rosneft', Gazprom and Novatek have announced enormous future Arctic extraction projects. Rosneft' has merged its oil projects in the north of the Krasnoyarsk Krai, particularly on the Taymyr Peninsula, under the name "Vostok-Oil". Production is scheduled to begin in 2030. The natural gas production and liquefaction facilities built by Novatek under the name "Arktik SPG-2" (Arctic LNG 2) on the Gydan peninsula to the east of the Ob River are scheduled to go into operation in 2026. Future projects include the development of natural gas fields under the names "Arktik SPG-1" and "Arktik SPG-3". Production at the "Kharasavey" gas field developed by Gazprom was originally intended to launch in 2024. The natural gas produced at the site was to be transported to Western customers via the Yamal-Europe pipeline. However, since Russian authorities banned the transportation of natural gas through that pipeline in May 2022, the future of the project has been uncertain.

Following the occupation of Crimea and the downing of Malaysian passenger plane MH17 in the summer of 2014, Western countries imposed targeted sanctions on raw material projects in the Arctic^(x). However, these restrictions encouraged Russian companies to establish relationships with non-Western credit and funding institutes, such as the China Export-Import Bank or the Silk Road Fund - and to accelerate the development of modern mining, drilling and shipping technologies inside Russia^(x). Immediately after the full-scale invasion of Ukraine in February 2022, a discussion began in the West as to whether sanctions should be massively expanded and an immediate embargo imposed on the import of natural gas from Russia. But several EU states, including Germany, opposed this because natural gas from Russia played a major role in their economies. France, Belgium and Spain were also not prepared to reduce imports of Russian liquefied natural gas^(x).

CONCLUSION

(Note: The full document provided ends at page 9 with the section above. Based on the "CONTENT" summary on page 1, the document continues with sections on "China on the sidelines of a militarising Arctic" and an "Annex", but these are not present in the fetched content snippet. The following concludes the OCR based on available text.)

DISCLAIMER: One of IRSEM's missions is to contribute to public debate on issues relating to defence and security. The views expressed in IRSEM's publications are the authors alone and are in no way representative of an official Ministry for Armed Forces stance.